As vast swathes of the economy continue to suffer the effects of the global pandemic, at least one corner of the retail market is winning: home improvement. Consumers, stuck at home more than ever before, are spending big on home offices, storage solutions, and décor. Both Lowes and Home Depot reported strong sales growth over the spring and summer, while Wayfair’s stock gained 1,356% in just five months.
Not all companies have profited equally, though. As was the case for many brick and mortar stores, global lockdowns hit Ikea hard. Over springtime, 75% of its stores were forced to close for periods of up to 12 weeks, resulting in the furloughing of thousands of staff. Eager to buy, consumers turned to Ikea’s online store. But the notoriously clunky and unreliable website couldn’t keep up with demand, and there were soon horror stories of unfulfilled orders and poor customer service. The Swedish retailer recently reported that in the 12 months to August its sales dropped 4% .
It’s not all bad news for Ikea, though. Despite a parade of difficulties with its online store, sales through the website grew substantially. In September, a noticeably relieved Jesper Brodin, CEO of INGKA Holdings – the primary Ikea franchisee – revealed online sales were up 60% during the pandemic and now make up 18% of the company’s total business. Without these gains, Ikea’s losses would undoubtedly have amounted to much more than 4%. Moreover, since stores began reopening over the summer, demand from in-person consumers has been consistently strong. Outdoor furniture and office furniture are powering recovery. Demand for desks – especially Ikea’s popular customizable desks – has outstripped supply. In August, parking lots were filled with customers desperately trying to secure desks, lamps, and shelves before their children started distance learning.
Buoyed by these positive signs, Ikea is putting its struggles in the rearview mirror and turning an eye to our post-pandemic future. The company intends to pursue a “total market approach” – a strategic marketing and business approach that recognizes and prioritizes a diverse customer base without necessarily segmenting the market. In September, the company announced that it will open 50 new stores worldwide, bringing the total to 445. In a dramatic departure from its traditional retail strategy, some of these new Ikeas will be small, city-center stores, rather than big-box suburban builds. According to Brodin, Ikea sees these new, smaller stores as important touchpoints, a way to “become more accessible to people where they are.” In a move that suggests Ikea is finally willing to take online shopping more seriously, it has expanded into three new e-commerce markets, including China. This month Ikea also announced that it will proceed with its Buy Back scheme. The program is part of Ikea’s efforts to be carbon neutral by 2030, and is also designed to take advantage of a strong furniture resale market powered by millennials who are increasingly eschewing brand new furniture. The program will launch in 27 countries, including the UK and Ireland (but not the U.S.) this November. It gives customers the opportunity to sell their used Ikea furniture back to the store in return for a voucher of up to 50% of the original purchase price. In turn, Ikea will open its first second-hand store, selling only used Ikea furniture, in Eskilstuna, Sweden, this Fall.
Riding this wave of pandemic-related growth, Ikea is betting big that it can predict life post-Covid. Is “nesting” really here to stay? Will young people return from the suburbs to the big cities? Can the company finally embrace our digital future? And how interested is China in buying Ikea’s products? The company’s future as a global, multi-platform retailer will depend on the answers.